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Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

Narasimhan Jegadeesh and Sheridan Titman
The Journal of Finance
Vol. 48, No. 1 (Mar., 1993), pp. 65-91
Published by: Wiley for the American Finance Association
DOI: 10.2307/2328882
Stable URL: http://www.jstor.org/stable/2328882
Page Count: 27
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Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
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Abstract

This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3- to 12-month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented.

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